As fintech applications become increasingly popular, the severity of potential cyberattacks, fraud, and noncompliance grows. Unfortunately, bad actors have already found workarounds for conventional solutions like strong passwords and two-factor authentication. Is biometric authentication the next step?
Why fintech apps need biometric authentication
Many people mistakenly believe using a fintech app is far more secure than other alternatives. While nearly 60 percent of people agree digital wallets are just as safe, if not safer, than conventional payment methods, they forget phones can also be lost. A bad actor can access the owner’s bank account the moment they get ahold of their device.
Since mobile banking gives users around-the-clock access to their accounts, bad actors don’t have to wait until a physical branch opens its doors to act. Instead, they can change account information or make unapproved transfers immediately.
Although passwords can prevent unauthorized access attempts, they aren’t foolproof — they can easily be leaked in a data breach or bypassed with a brute-force cyberattack. The same concept applies to various other verification and security measures. Given enough time, hackers figure out workarounds.
Fintech’s popularity is rising — the number of mobile banking app downloads totaled 34.74 million in the fourth quarter of 2023, up 3.24 million year-over-year. However, security and process flaws remain. Business leaders searching for a solution should consider biometric authentication as an alternative.
Biometric authentication’s role in fintech
Biometric data is the biological, physical, or behavioral characteristics of an individual’s body. Fingerprint scans, facial recognition, eye scans, and voice recognition are the four major types of authentication. In fintech, this technology is used for convenience, security, and compliance.
1. Customer experience
Convenience is huge in the digital age — consumers don’t want to wait for a second longer than they have to. Since minor annoyances like one too many security questions or a particularly long loading screen can drive away consumers, fintech companies must consider alternatives.
Biometric authentication is convenient, enhancing the customer experience. Users don’t have to remember or do anything to authorize payments, log into their accounts, or check their deposits. Moreover, scanning technology has already been built into most mobile devices.
2. Account security
Any online transaction, no matter how small, involves some level of risk for the user. Substandard security only heightens that risk, potentially allowing hackers to remotely access users’ bank accounts and make unauthorized transfers. Biometric authentication is one of the most effective ways to prevent this situation because it can’t be hacked. Even if bad actors steal three-dimensional face maps or eye scans, they can’t replicate those features.
3. Compliance
Compliance is one of biometric authentication’s main roles in fintech. Companies must protect users’ financial data or face legal repercussions and costly fines, so having an effective tool that prevents unauthorized access is significant. This way, teams can redirect their resources toward anticipating regulatory changes and securing high-priority storage systems.
4. Fraud prevention
Fraud is becoming increasingly common in fintech because processes are decentralized. Apps have no tellers who can recognize an individual by their voice or appearance — and attempting to tell whether someone is who they say they are by their account name alone is challenging.
Fraudsters can use someone else’s personally identifiable information to open a fake account. Alternatively, they can log in with a compromised password. In contrast, biometric data can’t be leaked or stolen, keeping them from getting past the login page.
Considerations before implementing biometrics
While implementing biometric authentication is generally beneficial, decision-makers must account for several considerations to ensure success. Privacy is one of the biggest concerns since the Federal Trade Commission (FTC) recently issued a warning about this technology and the information it collects.
According to the FTC, false or unsubstantiated claims about the accuracy of this biometric technology — including those regarding the collection and use of its data — breach the FTC Act. The agency has already brought enforcement actions against companies for noncompliance. Business leaders should take its actions as a sign to prioritize transparency.
Of course, data security is also an issue. Organizations should leverage encryption, authentication measures, and network monitoring tools when storing users’ fingerprints, eye scans, voice notes, and face maps. Otherwise, hackers may be able to infiltrate storage systems and exfiltrate datasets.
A bad actor stealing an audio snippet or face scan may not have meant much in the past. However, in the age of artificial intelligence, it could have a severe impact. Criminals can use deep learning models to create deepfakes — realistic, synthetic imitations of images or voices. This enables them to bypass authentication measures.
Notably, people may be able to bypass biometrics even without AI. Many cases exist in which facial recognition software accepts similar-looking individuals. Evidence shows family members can bypass this technology relatively easily. Therefore, not even biometric systems are foolproof — and business leaders should consider this when developing security.
The bottom line of leveraging biometrics in fintech
Although biometric authentication isn’t perfect, no authentication measure is. Besides, it can simultaneously improve the customer experience, security, and compliance — not many other solutions can say the same. Business leaders in fintech who need a security solution for their mobile app should consider this technology.
Zac Amos is the Features Editor at ReHack, where he covers business tech, HR, and cybersecurity. He is also a regular contributor at AllBusiness, TalentCulture, and VentureBeat. For more of his work, follow him on Twitter or LinkedIn.
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